Panasonic ready to spend US$1 billion on new deals in car, housing business

Bloomberg

Wed, Nov 13, 2013 - Page 15

Panasonic Corp said it can afford a deal worth ￥100 billion (US$1 billion) as the maker of electric-car batteries and solar panels looks to expand its automotive and housing businesses.

Acquisitions could include adding a company that can advance its auto technology or an overseas marketing channel for its home-related unit, chief financial officer Hideaki Kawai said on Friday last week. The maker of parts for Tesla Motors Inc’s electric vehicles last month announced a US$460 million deal for a 90 percent stake in an Istanbul-based wiring device maker.

Panasonic, which has eliminated about 71,000 jobs since 2011, is heading toward its first annual profit in three years as president Kazuhiro Tsuga accelerates reform by halting some smartphone and plasma panel operations. The company last month won a contract to supply cells to Tesla’s electric vehicles in a deal that may generate US$7 billion in revenue.

“We’ve improved our financial standing where we can afford an M&A at the ￥100 billion level,” Kawai said in an interview at the company’s Osaka headquarters. “We’ll make a very careful study into any deal, but our financial condition won’t limit us.”

Tsuga, who took the top job in June last year, has said he plans to spend ￥250 billion in restructuring during the two years to March 2015 to end losses from televisions, semiconductors, mobile phones, circuit boards and optical devices.

Reform expenses may exceed the target because the company now faces deteriorating demand for its digital cameras and air-conditioners, Kawai said.

“Our reform has just started,” Kawai said. “Our business environment is changing so rapidly, but our aim of ending losses at unprofitable operations within two years remains the same.”

The company is mulling selling assets, reorganizing offices and increasing outsourcing to revive the five unprofitable operations, Tsuga said on Oct. 31.

Kawai declined to say which plants Panasonic may shut.

In March, Panasonic sold its Tokyo office building for ￥50 billion to a real-estate trust. The electronics maker in September agreed to sell the majority of its stake in a healthcare unit to KKR & Co. The company has also agreed to a partial sale of a logistics unit to Nippon Express Co by the end of the year.

To turn around the TV operation, which may book an operating loss of ￥30 billion or more this financial year, Panasonic will focus on its factory-direct business in the US that sells straight to consumers and bypasses retailers. The TV unit probably will turn profitable by March 2016, it said last month.

While speeding up reforms in consumer electronics, the Japanese electronics maker, which also makes car audio systems and solar panels, plans to boost businesses related to automobiles and housing to double sales of each to ￥2 trillion by 2018.

Earnings in those areas have been “better than we had anticipated,” Kawai said.

The company announced on Oct. 31 it was acquiring a 90 percent stake in the Turkish wiring device maker Viko Elektrik Ve Elektronik Endustri Sanayi Ve Ticaret AS.